Falling oil price, which is expected to hit the economy harder later in the year, will make some weak banks to run into financial distress, it has been learnt.

Financial distress is a term in corporate finance used to indicate a condition when promises to creditors of a company or bank are broken or honored with difficulty, according to Wikipedia. It says if financial distress cannot be relieved, it can lead to bankruptcy.

Top bankers told our correspondent on Thursday that some financial institution had started seeing signs that the year would be very difficult owing to the falling oil prices.

The development, they said, might make profits in some banks to tumble within the third and fourth quarters of the year.

“This year is going to be very difficult from what we are seeing already; some banks will run into financial distresses but I don’t think any bank will collapse,” a top official of one of the top banks said.

Analysts had said that a number of regulatory measures aimed at stabilising the economy would also make it difficult for banks to make higher profit this year.

The Managing Director, Afrinvest West Africa Limited, an investment advisory firm, Mr. Ike Chioke, said reduction in banks’ fee income would make the year a turbulent one for the financial institutions.

He said, “It is going to be very challenging for the banking sector this year. You remember a gradual progression of the CBN trying to reduce the fee element that the banks do enjoy. The Commission on Turnover for example has been reduced from 5 to 3 and one per mille. By 2016, it will be reduced to zero.”

“The CBN has also come up with a lot of measures to control the foreign exchange. All of these are taking away the fee incomes that the banks would ordinarily have enjoyed. So, I see that some banks will be in a place where their cost structure may be too difficult for the income generated to carry. So, they will have to find new ways to generate additional income.

“But trying to find new ways to generate additional income in an environment where there is declining revenue overall for the federal, state and local governments is going to be very difficult. It is going to be a depressed year for the banks.

Good ones may probably report something closer to 2014 if they are lucky but the 2014 results have yet to released; the 2014 result is probably going to be weaker than 2013. So, it will be a hard time. If the banks are having difficulty, you would expect that the rest of the economy.”

The Managing Director, Asset Management Corporation of Nigeria, Mr. Mustafa Chike-Obi, had recently said falling oil prices would cause “serious economic headwind” this year and that banks would be forced to record very significant increase in the non-performing loans in their books.

Chike-Obi said, “We can see that there is an economic headwind coming to Nigeria this year; and when the economic headwind comes, it will certainly impact on the Non-Performing Loans levels. So, we expect an increase in the NPL levels this year.

Fitch Ratings had in a report released on October 8, 2014 said that although the banks’ NPLs were below five per cent as of last year, it would not be sustainable in the long run. This, it said, was because regulatory measures by the CBN might make the NPLs to rise further this year.

Fitch, in the report, also said actions aimed at protecting the economy and the banking system by the CBN would make the profits of the Deposit Money Banks for this year to drop.

http://www.punchng.com/business/oil-slump-banks-face-financial-distress/

Streets is Watching

All is well
I just pray it won't affect my friends and acquaintances.

OOogao For How long will this continue ?

.

Not to worry, once we "find" it he will wage the falling oil price with his bare hands from further free fall

A proud RED DEVIL
+
A diehard saTAN
+
An unrepentant TANOID

Thats who i am

Really?

God have mercy!

believe GOD rather than what the world is saying

Its hitting Russia and Iran hardest . To the extent that the president of Iran said the fall in oil price is being caused by the enemies of his religion...Lol

previously mouthy, Iran has now started negotiating with US.
North Korean president had to travel out of his country for the first time ever, he went to Russia for talks, but they too are in trouble , now he has opened talks with US.

Saudi Arabia is not hurt at all. They have billions of dollars stock piled in reserves over they years. They can last for several more years without selling a single barrel.

Buhari has promised to stabilise this world oil market.

Some people think this fall is caused locally .
Obama fulfilled his promise, America started digging their own oil, and stopped importing. This affected all oil producing states.
Oil full everywhere in the world now berekete. lol

sack tins loading for some peeps in banks

Here comes d effect of focus n depending on One Sector of d economy

Odikwa very risky Oooooo.


Fresh air have seized. This air is damn hot.

Any way, he doesn't give a damn.

"I will stabilize crude oil prices".

Oil slump: Dollar now sells for N208. Jona
might not certainly have control over forces
controlling oil price, but what happen to
diversification. Only a clueless president does
not understand d risk of overdependence on
one sector. Yet he keeps fooling Nigerians
(those who want to be fooled, not me) that he
has made Nigerian economy d largest in
Africa. with this kind of devaluation imagine
how our naira would be in d nxt 3-4 yrs if he's
re-elected. # wewantchange#

That's why I love the Agric sector. Everybody must eat so I must make more money

Chai, see what GEJ has caused.






If you like, dont vote for buhari, you will soon rundown completely.
#saibuhari

Na wa oo. End justifies the means anyway.

Things fall apart!!

juniormusa:
Let's support GEJ
Vote wisely
Buhari has nothing to offer.

And can you point to any financial policy or decision made by GEJ that has assisted Nigeria or a pointer that it will help in the long run.
You can't expect a different result if you keep doing the same things.

Mr Mustafa Chike-obi?
Mustafa?

Oil oil oil and oil. Your a good servant but, a bad master to my country.

There is Hope for Nigeria, the prices will soon start going up. Becos most of the Shale Oil production will have to stop @ the current rate.
Which will cos increase in demand and reduced supply until it gets to maybe 70 smth or 80 dollars per barrel.

But it may take some time!!!